How China’s industrial tentacles are steadily encircling the globe
IT WAS in the late 1990s that the first batch of Chinese businessmen launched the idea of building overseas industrial parks, also called “economic zones”, so that they could sell more goods around the world and capitalise on lower labour and transport costs.
Over the past 12 years, this model has proved to be one of the most successful features of China’s economic reforms and its opening up to the world. From India’s Deccan Plateau, to the coast of the Red Sea, to the heartland of America, Chinese industrial parks can be found almost everywhere Chinese goods are sold.
The deputy director of the Overseas Investment Advisory Centre of China’s commerce ministry, Li Zhipeng, says more than 100 Chinese industrial parks have been built abroad.
“The six largest ones account for a total investment of over 10-billion yuan ($1.6bn), more than 400 companies creating over 40,000 jobs locally,” said Li.
Industrial parks are by no means a Chinese invention, having begun decades earlier in developed countries. But China has been efficient in adopting the model, and the pace of new construction is an impressive demonstration of China’s economic progress.
Other developing countries are turning to China to help them follow the same path.
Tianjin Teda, a state-owned conglomerate, set up the Egypt Suez Economic and Trade Co-operation Zone project with the Egyptian government. Egyptian executives declared that their goal was “to copy the model used by Teda to run its economic zone back at home”.
The original vision for setting up an economic zone was for the purpose of manufacturing convenience; the leading industry would attract and gather support industries, thus forming a complete industrial chain, and it could avoid the risks of struggling alone abroad.
For instance, in 1999, Haier, a home appliance and consumer electronics multinational, built its first production facility park in South Carolina, in the US. Its second park followed two years later in Pakistan, marking the beginning of Haier’s brand building abroad.
Li said the large and systematic establishment of Chinese industrial parks began around 2006, in line with the country’s “Go Out” policy. “Before that, these parks were set up by enterprises themselves at a relatively small scale. They were fragmented and overall not very big,” he said.
The Holley Group, a conglomerate with diversified investments, set up the Rayong Industrial Park in Thailand and attracted more than 20 Chinese enterprises. The success of the park changed the Thai government’s wary attitude towards China, said Hu Hai, Holley’s GM for overseas businesses.
“They discovered that they had spent years trying to attract Chinese investments without success while it was much easier for us.
“Since then, the Thai authorities make the approaches for joint ventures with us,” said Hu.
He also pointed out that Chinese companies were not really set up for foreign direct investment a decade ago, which made building an economic and trading zone the logical way to expand abroad.
Since then, Chinese parks have mushroomed on every continent. They have also become more integrated locally.
“Our first-generation parks were just to meet Chinese firms’ manufacturing needs,” he said.
“But our second-generation parks are not just about sending in bulldozers, building roads and equipping them with water and electricity. We also have to consider how we integrate with the local community more harmoniously.”
The many differences in laws, policies, culture and customs are among the biggest challenges the overseas Chinese parks face. In order to be better accepted by the locals, Holley chose to co-operate with Thailand’s largest property company, Amata. In Mexico, Holley works with an influential local family business in the telecommunications industry.
Meanwhile, Haier is obliged to adapt its operation and management mentalities to local conditions in India and Pakistan.
The success stories eventually attracted the interest of higher authorities and the fragmented action was integrated into a national strategy. The China-Belarus Industrial Park is one such product.
During his recent visit to Belarus, Chinese leader Xi Jinping visited the park and called it a model of China’s new Silk Road initiative and international co-operation.
Meanwhile, the Sino-Russia Silk Road Innovation Park is being put forward with the “One Park Two Places” model — one innovation centre is to be built in China’s western city of Xian and another in Skolkovo in Russia.
The goal is to promote each other’s enterprises by investing mutually in the other country and sharing resources.
Chinese-style economic zones are going abroad. In history, large-scale commercial communication has always led to far-reaching cultural and ideological fusion.
Whether successful or not, the experiences of Chinese economic zone exploration will become part of the history of China opening up to the world. New York Times
We also have to consider how we integrate with the local community